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Another Reason It's Good to Read the NEWS PAGES of the Wall Street Journal

Mark Thoma directs us to Greg Ip and Deborah Solomon of the Wall Street Jounal, who dig a little and find that Bush's claims that revenue is higher than anticipated because growth is higher than anticipated have even less contact with reality than I had imagined. To say that things are "working" because real wage growth is surprisingly low is a stretch, even for the Bushies:

Economist's View: Income Redistribution and Tax Revenue: Greg Ip and Deborah Solomon look at the recent increase in tax revenues and note that while tax revenues and output both exceeded projections, the amount that output growth exceeded projections was small. This implies the unexpected increase in tax revenue is largely a compositional effect rather than a consequence of higher than expected economic growth:

As Bigger Piece of Economic Pie Shifts To Wealthiest, U.S. Deficit Heads Downward, by Greg Ip and Deborah Solomon: In announcing a big drop in its estimate of this year's federal budget deficit, the Bush administration was quick to credit itself. "Tax cuts worked to generate economic growth, and economic growth is now working to raise revenues," White House budget director Rob Portman said.... But this explanation falls short. While tax revenue is growing far faster than the Bush administration forecast in its budget projections in February, the nation's economy isn't. What has changed isn't the size of the economy, but how the economic pie is divided. The share of national income going to corporations and the wealthiest individuals, already large, has expanded....

U.S. tax revenue for fiscal 2006... is expected to be... $115 billion... higher, than the administration projected in February.... But total economic output... adjusting for inflation, it is projected to be just 0.1% larger.... So, the tax windfall is another piece of evidence that income inequality in the U.S. continues to grow, which in turn may explain why the average American still gives President Bush low marks on the economy despite its overall strength....

Rudolph Penner, a senior fellow at the Urban Institute, a Washington think tank, and a CBO director picked by Republicans in the 1980s, says a supply-side effect "doesn't come close to explaining the revenue surge."... He notes the administration itself puts the tax cuts' maximum supply-side boost at just 0.7% of GDP, stretched over many years...

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